Prepared by Jessica Weiss, Esq., Partner, Weiss & Moy, P.C.

Why the deal structure matters

A buyer can be ready to purchase a business and the seller can be ready to sign, but an E-2 visa problem can still be hiding in the deal terms. Some issues that I see often that could create problems for an E-2 business deal are over whether a deposit is refundable or not, the financing if tied to the business, the seller if wanting to keep some ownership and control over the deal, and/or the buyer not being able to take over the E-2 business till the visa is issued.  

E-2 strategy should be part of the deal conversation from the start. The purchase agreement terms, deposit details, financing, seller obligations, assets, and operating plan should all be consistent with E-2 visa requirements. Brokers play a key role in this process because they help people spot issues for E-2 visa purposes and bring it to the attention of a qualified Immigration lawyer.   

First Step is Start with What Exactly is the Deal?

What exactly is the buyer buying? The purchase agreement should clearly identify the business, assets or equity included, purchase price, required deposit, and when the investment becomes committed. If the agreement is vague, the immigration filing may also struggle to connect the buyer’s investment to one specific business and one specific transaction.

The funding plan to buy the business should be negotiated alongside the purchase details, not after it. Will the buyer use savings, a gift, a loan, proceeds from another asset, or money moving through related companies? Were taxes paid on funds being used to buy the business? As all funds must come from legal sources for E-2 investment purposes. A funding path assembled at the last minute can delay the transaction and create questions about whether the money was actually committed to the business timely.

If the buyer is using a loan, the parties should review the collateral and repayment terms carefully. Financing secured by the buyer’s personal assets may be treated differently from financing secured by the business being purchased. The later is not so desirable for E-2 investor visa purposes. The loan documents, purchase agreement, escrow instructions, and business plan should all describe the same transaction and the same use of the funds. Consistency is key.

The buyer should also confirm whether any other person or entity has rights in the investment and whether the documents reflect who is actually making the purchase. These details can affect the purchase agreement, the ownership structure, the flow of funds, and the buyer’s ability to operate the business after the transaction.

Make every dollar match the deal

Funds may pass through more than one account, company, or country before reaching the U.S. business. That does not automatically make the transaction unworkable, but each step should have a clear business and documentary explanation. The file should show who controlled the funds before they were used to buy the US business, why they moved, and how they were applied to the purchase or required business expenses. At our firm we help clients present a clear picture of all fund transfers to qualify for the E-2 investor visa.

This is especially important when the buyer uses related companies or an existing business to make the investment. Ownership records, transfer documents, bank statements, corporate resolutions, and accounting records should support the structure described in the purchase agreement. A simple ownership and money-flow chart can help the broker, buyer, seller, accountants, and immigration counsel understand the same deal quickly. The more entities and transfers involved, the more important it is to make the transaction easy to follow. At our firm we had a case that had several company transfers of funds abroad then several to companies in the US and we were able to show through a detailed organization chart and proper documentation that the funds were always in the position

What happens if the visa takes longer?

Visa processing may not follow the same timeline as the commercial transaction. Before signing, the parties should discuss whether the agreement will depend on visa issuance, how long the buyer has to complete the purchase, whether the seller will extend the deadline, and what happens to the deposit or escrowed funds if processing takes longer than expected.

A visa-contingent purchase may still support an E-2 case when the buyer has made a real commitment, such as placing funds in escrow for release when the condition is satisfied. But escrow is not a substitute for careful drafting. The release conditions, deposit terms, funding, purchase agreement, and immigration filing must all fit together.

If the price changes, the assets being purchased change, the seller remains involved, or the parties amend the transaction terms, the immigration team should receive the updated documents. A material change can affect how the investment, the business, and the buyer’s role are presented. Keeping the transaction documents coordinated protects everyone from relying on an outdated version of the deal.

Make sure the buyer can actually run the business

The transaction should explain what the buyer will do after acquiring the business. The buyer’s ownership interest, authority to make decisions, day-to-day role, and ability to develop and direct the enterprise should match the documents. If a partner, family member, seller, or management company will retain a role, that arrangement should be clearly reflected rather than left ambiguous. It can also hurt the success of the E-2 investor application if the investor isn’t playing a regular role in running fo the US business he just purchased.

The buyer should also understand whether the deal is an asset purchase or an equity purchase and what obligations come with it. The structure can affect contracts, licenses, employees, permits, liabilities, and the buyer’s ability to operate immediately. Transaction and tax counsel should address those issues while immigration counsel reviews whether the final structure supports the intended E-2 investment and operating role.

Staffing issues need to be addressed as well before a deal closes. If the buyer is relying on existing employees, management, or contractors to keep the business operating, the parties should confirm what will continue after the purchase. Payroll records, employment agreements, work authorization records, and contractor arrangements should be reviewed so that the buyer does not discover a problem only after taking over the business.

Questions that should be answered before signing

A broker can help protect the transaction by asking: What exactly is being purchased? How will the investment be funded and transferred? What will the deposit and escrow terms require? What happens if visa processing takes longer than expected? Will the seller remain involved? Who will own and control the business after the purchase? What documents must be updated before funds move or the buyer takes over? Brokers will connect the buyer with qualified immigration counsel while these terms can still be negotiated not after a purchase agreement is signed and executed.

A strong E-2 deal is a transaction in which the purchase terms, funding, documents, timing, and operating plan all work together. Attorney Jessica Weiss has 27 years of experience handling U.S. immigration matters especially E-2 visa applications throughout her entire professional career. She continues to help identify issues early in E-2 visa matters, while the deal can still be improved and helps buyers obtain successful E-2 visa applications. 

Disclaimer: The information provided in this blog post is for educational purposes only and does not constitute financial or investment advice. The process of buying a business is complex and varies from one situation to another. Readers are encouraged to consult with qualified professionals, including business brokers, accountants, and financial advisors, to obtain advice tailored to their specific circumstances. FCBB (First Choice Business Brokers) is not responsible for any actions taken or not taken based on the information provided herein, and does not conduct due diligence on behalf of buyers. Buyers are solely responsible for conducting their own thorough and independent due diligence.